Electronics growth threatened by fiscal uncertainty, higher taxes

Electronics growth threatened by fiscal uncertainty, higher taxes

HALF MOON BAY, Calif.--The global economy and by extension theelectronics industry now tied at its hip will continue to plodforward in the coming months, experiencing very modest growth, butgovernmental fiscal issues worldwide and a higher U.S. payroll taxcould drag that down in 2013.

That was the mixed assessment Monday (Jan. 14) from economists andindustry observers at semiconductor equipment vendor trade group SEMI's annual Industry Strategy Symposiumhere.

"We're seeing this lift begin to take hold," said Bruce Kasman,chief economist and managing director of global research for J.P.Morgan. Kasman said the bar "was not high" for improvement, but henoted that fear- and uncertainty-fueled corporate pullbacks in themiddle of 2012 have given way to a more positive outlook.

Two factors could exert drag on that lift, however, Kasman said:fiscal and credit issues in the U.S. and Europe and consumerpullback in North America thanks to higher payrolls taxes. Thosefiscal issues will create a one-half percentage-point drag ongrowth in 2013, compared with 2012, he said.

Secondly, in the United States, the $125 billion payroll tax hikehits people's paychecks in the first part of the year. Wherebusinesses took their "step back" in the middle of 2012 and havesince rebounded, consumers ended 2012 optimistically.

"We're a little worried that the U.S. consumers are not only sittingwith a tax increase but a tax increase that it really didn'tposition itself for in terms of expectations," Kasman said. "We dothink there's a hit here coming and a fairly significant one as faras consumption's concerned at the start of the year," he added.



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